EXECUTION COPY
--------------
RECAPITALIZATION AGREEMENT
This RECAPITALIZATION AGREEMENT (the "Agreement") is made and
entered into as of this 12th day of April, 2002, by and among the XxXxxx
Xxxxxxx-Reader's Digest Fund, Inc., a New York not-for-profit corporation (the
"XxXxxx Xxxxxxx Fund"), the Xxxx Xxxxxxx-Reader's Digest Fund, Inc., a New York
not-for-profit corporation (the "Xxxx Xxxxxxx Fund;" each of the XxXxxx Xxxxxxx
Fund and the Xxxx Xxxxxxx Fund is hereinafter referred to as a "Fund" and,
together are hereinafter referred to as the "Funds"), and The Reader's Digest
Association, Inc., a Delaware corporation (the "Company").
WHEREAS, the Company and the Funds have agreed to effect a
series of transactions pursuant to which, as provided herein: (1) all shares of
voting and nonvoting common stock of the Company will be recapitalized (the
"Recapitalization") into one class of voting stock by means of a merger of a
wholly-owned subsidiary of the Company into the Company, which merger the Funds
have agreed to support, (2) in consideration for the recapitalization, the
Company has agreed to repurchase certain of the shares of voting stock held by
the Funds for cash, at a premium, (3) all remaining shares of voting stock will
be converted in the merger at the same premium and (4) the Company will grant
registration rights to the Funds.
WHEREAS, as of March 31, 2002, the Company had issued and
there were outstanding: 12,432,164 shares of Class B Voting Common Stock, par
value $.0l per share (the "Class B Stock"), and 87,223,289 shares of Class A
Nonvoting Common Stock, par value $.0l per share (the "Class A Stock").
WHEREAS, the XxXxxx Xxxxxxx Fund owns 3,108,041 shares of
Class B Stock (constituting approximately 25.0%) of the outstanding Class B
Stock; the Xxxx Xxxxxxx Fund owns 3,108,041 shares of Class B Stock
(constituting approximately 25.0%) of the outstanding Class B Stock; the XxXxxx
Xxxxxxx Fund owns 6,693,094 shares of Class A Stock (constituting approximately
7.7%) of the outstanding Class A Stock and the Xxxx Xxxxxxx Fund owns 3,970,969
shares of Class A Stock (constituting approximately 4.6%) of the outstanding
Class A Stock.
WHEREAS, prior to the mailing of the Proxy Statement (as
defined herein), the Company shall form a wholly-owned subsidiary ("Merger Sub")
with which it shall enter into a merger agreement the ("Merger Agreement")
substantially in the form attached as Exhibit A hereto, pursuant to which, among
other things, Merger Sub shall merge with and into the Company with the Company
surviving (the "Merger").
WHEREAS, immediately prior to the Merger, the Company will
purchase and the XxXxxx Xxxxxxx Fund will sell to the Company 1,818,182 shares
of Class B Stock (the "DWF Sale Shares") for an aggregate of $50,000,005, and
the Company will purchase and the Xxxx Xxxxxxx Fund will sell to the Company
1,818,181 shares of Class B Stock (the "LWF Sale Shares," and together with the
DWF Sale Shares, the "Sale Shares") for an aggregate of $49,999,978, in each
case on the basis of $27.50 for each Sale Share, in accordance with the terms
of, and subject to the conditions set forth in, this Agreement (collectively,
the "Share Purchase").
-1-
WHEREAS, in the Merger each issued and outstanding share of
Class B Stock outstanding immediately prior to the Effective Time will be
converted into 1.24 shares of Common Stock of the Company, par value $.01 per
share (the "Common Stock"), with each share of Common Stock being entitled to
one vote per share, and each share of Class A Stock outstanding immediately
prior to the Effective Time will be converted into one share of Common Stock in
accordance with the terms of the Merger Agreement.
WHEREAS, in connection with the Merger, the Company's Restated
Certificate of Incorporation, as amended, will be amended to reflect the
reclassification of Class B Stock and Class A Stock into shares of Common Stock
and to provide for the classification of the Company's Board of Directors into
three classes, and the elimination of action by written consent of the
stockholders without a meeting, as well as certain related matters.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth in this
Agreement, the Company and the Funds agree as follows:
ARTICLE I
THE CLOSING
1.1 Closing. Subject to the fulfillment or waiver of the
conditions set forth in Article V, the closing of the Share Purchase and the
Recapitalization (the "Closing") shall take place (a) at the offices of
Wachtell, Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
commencing at 9:00 a.m. local time on the earliest practicable date (but no
later than the fifth business day) following satisfaction or waiver of the
conditions set forth in Article V or (b) at such other place and/or time and/or
on such other date as the Company and the Funds may agree. The date on which the
Closing occurs shall be the "Closing Date." The Closing will consist of the
following steps:
(a) The Share Purchase. Immediately prior to the filing and
effectiveness of the certificate of merger effecting the Merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
the Company shall purchase for an aggregate cash purchase price of $99,999,983
(the "Purchase Price") the Sale Shares and the Funds shall transfer and deliver
to the Company, free and clear of all liens, claims, security interests,
pledges, charges and other encumbrances (collectively, "Encumbrances"), the Sale
Shares. The Funds shall deliver to the Company share certificates representing
all of the Sale Shares, fully endorsed or with appropriate stock powers in form
sufficient for transfer of such shares to the Company, and a true and complete
copy of the resolutions duly and validly adopted by the Board of Directors and
the Members of each Fund authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. The
Company shall pay to the Funds the Purchase Price by wire transfer of
immediately available funds to an account or accounts designated by the Funds in
writing at least two business days prior to the Closing Date.
(b) The Merger. Immediately following the consummation of the
Share Purchase, the Company shall file the Certificate of Merger with the
Secretary of State of the State of Delaware and the Merger shall become
effective on the date and at the time (the "Effective Time") that the
Certificate of Merger shall have been accepted by the Secretary of
-2-
State of the State of Delaware. Upon the Effective Time, each share certificate
representing shares of Class B Stock shall represent such number of shares of
Common Stock obtained by multiplying the number of shares of Class B Stock
theretofore evidenced by such certificate by 1.24, and each share certificate
representing shares of Class A Stock shall represent the same number of shares
of Common Stock. Notwithstanding anything to the contrary contained herein, no
fractional shares of Common Stock shall be issued to any holder of shares of
Class B Stock. Instead of issuing fractional shares of Common Stock, the Company
shall arrange for the disposition of fractional interests by those entitled
thereto by the mechanism of having (1) the transfer agent or other agent of the
Company aggregate such fractional interests, (2) the shares resulting from the
aggregation sold and (3) the net proceeds received from the sale allocated and
distributed among the holders of the fractional interests as their respective
interests appear.
(c) Alternative Structure. Notwithstanding the foregoing, in
the event that holders of more than $5 million in the aggregate of stated or
liquidation value of the Company's preferred stock shall have properly made a
demand for appraisal rights with respect to the Merger under applicable law, the
Recapitalization shall be effected through a certificate of amendment (the
"Certificate of Amendment") to the Company's Restated Certificate of
Incorporation, as amended (the "Charter Amendment"), rather than through the
Merger and the "Effective Time" shall be the date and time that the Certificate
of Amendment shall have been accepted by the Secretary of State of the State of
Delaware. All references herein to the "Recapitalization" shall include the
Merger and the Charter Amendment, as applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Funds to enter into this Agreement, the
Company hereby represents and warrants to each Fund as follows:
2.1 Corporate Power and Authority. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to enter
into and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company, subject
to receipt of the requisite approval of the Merger Agreement, the Merger and the
transactions contemplated thereby or, alternatively, the Charter Amendment by
the holders of a majority of the outstanding shares of Class B Stock (the
"Requisite Stockholder Approval"). This Agreement has been duly executed and
delivered by the Company and (assuming due authorization, execution and delivery
by each Fund) constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms subject to (a)
applicable bankruptcy, insolvency, fraudulent conveyance and other similar laws
and (b) general principles of equity, including equitable defenses and limits as
to the availability of equitable remedies, whether such principles are
considered in a proceeding at law or in equity.
2.2 Capitalization of the Company. As of the date of this
Agreement, the Company's authorized capital stock consists solely of (a)
200,000,000 shares of Class A Stock, (b) 25,000,000 shares of Class B Stock, (c)
40,000 shares of Preferred Stock, par value $1.00 per
-3-
share (the "First Preferred Stock"), (d) 120,000 shares of Second Preferred
Stock, par value $1.00 per share (the "Second Preferred Stock"), (e) 230,000
shares of Third Subordinated Preferred Stock, par value $1.00 per share (the
"Third Preferred Stock"), and (f) 25,000,000 shares of Preference Stock, par
value $.0l per share (the "Preference Stock"). As of March 31, 2002, (a)
87,223,289 shares of Class A Stock were issued and outstanding and 32,205,183
shares of Class A Stock were issued and held in treasury, and (b) 12,432,164
shares of Class B Stock were issued and outstanding and 9,283,893 shares of
Class B Stock were issued and held in treasury. As of the date of this
Agreement, (a) 29,720 shares of First Preferred Stock are issued and
outstanding, (b) 103,720 shares of Second Preferred Stock are issued and
outstanding, (c) 155,022 shares of Third Preferred Stock are issued and
outstanding and (d) no shares of Preference Stock are issued and outstanding.
Upon consummation of the Recapitalization, each of the shares of Common Stock
issued to the Funds in the Merger or, if applicable, by virtue of the Charter
Amendment will be duly authorized, validly issued and fully paid and
nonassessable and will not have been issued in violation of any preemptive or
similar rights.
2.3 Conflicts; Consents and Approvals. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement do not and will not (a) violate, conflict with, or result in a
breach of any provision of, or constitute a default under, the Company's
Restated Certificate of Incorporation, as amended, or Amended and Restated
By-laws; (b) subject to receipt of the Financing (as defined in Section 2.5)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with the giving of notice or lapse of
time or both, would become a default) under, or entitle any party to terminate,
accelerate, modify or call a default under, or result in the creation of any
Encumbrance upon any of the properties or assets of the Company under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, contract, undertaking, agreement, lease or other instrument
or obligation to which the Company is a party; (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company; or
(d) other than the Requisite Stockholder Approval, the filing of the Certificate
of Merger or, if applicable, the Certificate of Amendment with the Secretary of
State of the State of Delaware, required filings with the Securities and
Exchange Commission (the "Commission") or pursuant to state securities or "blue
sky" laws, and the approval by the New York Stock Exchange of the shares of
Common Stock for listing upon notice of issuance, require any action or consent
or approval of, or review by, or registration or material filing by the Company
with, any third party or any local, state or federal court, arbitral tribunal,
administrative agency or commission or other governmental or regulatory body,
agency, instrumentality or authority, except, with respect to clauses (b), (c)
and (d), as would not have a material adverse effect on the Company.
2.4 Board Recommendation. In accordance with the applicable
provisions of the Delaware General Corporation Law and the Company's Restated
Certificate of Incorporation, as amended, and Amended and Restated By-laws, the
Board of Directors of the Company, at a meeting duly called and held at which a
quorum was present throughout, upon the recommendation of a special committee of
the Board of Directors, has adopted a resolution proposing and declaring the
advisability of this Agreement and the transactions contemplated hereby,
including the Merger Agreement, the Merger and, in the alternative, the Charter
Amendment.
-4-
2.5 Financing. The Company has obtained a written commitment
(the "Commitment Letter") from JPMorgan Chase Bank, X.X. Xxxxxx Securities, Inc.
and Xxxxxxx Sachs Credit Partners L.P. to provide the financing necessary for
the completion of the Share Purchase as well as the acquisition of substantially
all of the assets of Xxxxxx Holding Company, LLC ("Xxxxxx") and its subsidiaries
(the "Xxxxxx Acquisition") pursuant to the Asset Purchase Agreement, dated as of
March 21, 2002, by and among Xxxxxx, the Company, and, with respect to Sections
3.2(h), 4.26 and 6.5 and Articles XI (solely to the extent provided therein) and
XIII thereof, the equityholders of Xxxxxx whose names are set forth on the
signature pages thereto (the total amount of such financing being the
"Financing"). The Company has delivered to the Funds a true and correct copy of
the Commitment Letter. The Commitment Letter is in full force and effect.
2.6 Litigation. As of the date immediately preceding the date
hereof, to the Company's knowledge, there are no actions, suits or proceedings
pending against the Company (or any of its properties, rights or franchises), at
law or in equity, or before any federal or state commission, board, bureau,
agency, regulatory or administrative instrumentality or other governmental
authority or any arbitrator or arbitration tribunal, that would reasonably be
expected to, individually or in the aggregate, prevent, materially impair or
materially delay the consummation of the transactions contemplated hereby.
2.7 Registration Statement/Proxy Statement. (a) Each of the
registration statement to be filed with the Commission by the Company, as
amended or supplemented from time to time (as so amended and supplemented, the
"Registration Statement"), which shall include a proxy statement in connection
with the Stockholders' Meeting (as herein defined) (the "Proxy Statement") will
comply as to form, in all material respects, with the requirements of the
Securities Exchange Act of 1934, as amended and the rules and regulations
promulgated thereunder (the "Exchange Act"), and the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder (the "Securities
Act"), as the case may be, and will not, on the date of its filing or at the
time it becomes effective under the Securities Act or on the date the Proxy
Statement is mailed to stockholders of the Company and at the time of the
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
(b) Notwithstanding paragraph (a) of this Section 2.7, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Registration Statement or the Proxy
Statement based on information supplied by the Funds expressly for inclusion or
incorporation by reference therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE FUNDS
In order to induce the Company to enter into this Agreement,
each Fund represents and warrants to the Company as follows:
3.1 Title to Shares. The XxXxxx Xxxxxxx Fund owns 6,693,094
shares of Class A Stock and owns and has the power to vote 3,108,041 shares of
Class B Stock. The Xxxx
-5-
Xxxxxxx Fund owns 3,970,969 shares of Class A Stock and owns and has the power
to vote 3,108,041 shares of Class B Stock. Each such Fund has good title, free
and clear of all Encumbrances, to all of its shares of Class A Stock and Class B
Stock.
3.2 Corporate Power and Authority. Such Fund is duly organized
and validly existing under the laws of the State of New York. It has all
requisite corporate power and authority to enter into and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement by it has been duly authorized by all necessary
corporate action on its part. This Agreement has been duly executed and
delivered by such Fund and (assuming due authorization, execution and delivery
by the Company) constitutes the legal, valid and binding obligation of such
Fund, enforceable against it in accordance with its terms subject to (a)
applicable bankruptcy, insolvency, fraudulent conveyance and other similar laws
and (b) general principles of equity, including equitable defenses and limits as
to the availability of equitable remedies, whether such principles are
considered in a proceeding at law or in equity.
3.3 Conflicts; Consents and Approvals. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement do not and will not (a) violate, conflict with, or result in a
breach of any provision of or, constitute a default under, its Certificate of
Incorporation or Amended and Restated By-laws or other governing or
organizational documents; (b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with the giving
of notice or lapse of time or both, would become a default) under, or entitle
any party to terminate, accelerate, modify or call a default under, or result in
the creation of any Encumbrance upon any of its properties or assets under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, undertaking, agreement, lease or other
instrument or obligation to which it is a party; (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to it; or (d) require
any action or consent or approval of, or review by, or registration or material
filing by it with, any third party or any local, state or federal court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority except, with respect to
clauses (b), (c) and (d), as would not have a material adverse effect on such
Fund.
3.4 Litigation. As of the date immediately preceding the date
hereof, to the knowledge of the Funds, there are no actions, suits or
proceedings pending against either of the Funds (or any of such Fund's
properties, rights or franchises), at law or in equity, or before any federal or
state commission, board, bureau, agency, regulatory or administrative
instrumentality or other governmental authority or any arbitrator or arbitration
tribunal, that would reasonably be expected to, individually or in the
aggregate, prevent, materially impair or materially delay the consummation of
the transactions contemplated hereby.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Stockholders' Meeting. The Company shall call and hold a
meeting of stockholders (the "Stockholders' Meeting") as promptly as practicable
for the purpose of seeking the Requisite Stockholder Approval, and the Company
shall use its reasonable best efforts to
-6-
hold the Stockholders' Meeting as soon as practicable following the filing of a
definitive proxy statement relating to such meeting. The Board of Directors of
the Company shall recommend approval of the Merger Agreement, the Merger and the
other transactions contemplated thereby and, in the alternative, the Charter
Amendment to the holders of Class B Stock.
4.2 Registration Statement; Proxy Materials. The Company shall
prepare and file as soon as practicable a Registration Statement which shall
include the Proxy Statement. The Proxy Statement shall include the
recommendation of the Board of Directors of the Company to the holders of Class
B Stock that they vote in favor of the Merger Agreement, the Merger and the
other transactions contemplated thereby and, in the alternative, the Charter
Amendment. The Company agrees that it shall give the Funds and their counsel a
reasonable opportunity to review and provide comments on any description of or
reference to the Funds, or any description of the reasons for and consequences
of the transactions contemplated by this Agreement (including, without
limitation, the Merger and, in the alternative, the Charter Amendment), set
forth in any notice, consent solicitation or proxy statement distributed to the
stockholders in connection with the Stockholders' Meeting, prior to any such
distribution.
4.3 Voting; Transfer; Irrevocable Proxy. Each Fund agrees to
vote all shares of Class B Stock owned by it in favor of the Merger Agreement,
the Merger and the other transactions contemplated thereby and, in the
alternative, the Charter Amendment at the Stockholders' Meeting and not to,
directly or indirectly, cause or encourage any other person or entity to vote
against the Merger Agreement, the Merger and the other transactions contemplated
thereby or, if applicable, the Charter Amendment. Without the prior written
consent of the Company, the Funds shall not, directly or indirectly (a) grant
any proxies or enter into any voting trust or other agreement or arrangement
with respect to the voting of any shares of Class B Stock or (b) acquire, sell,
assign, transfer, encumber or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the direct or
indirect acquisition or sale, assignment, transfer, Encumbrance or other
disposition of, any shares of Class B Stock or, other than transactions which
comply with Rule 144 of the Securities Act, Class A Stock, during the term of
this Agreement or solicit or encourage any such transaction or a proposal or
offer for any such transaction. Each of the Funds hereby grants to the Company
an irrevocable proxy, coupled with an interest, with respect to the matters
subject to the Requisite Stockholder Approval and hereby appoints and
constitutes the Company its true and lawful attorney-in-fact and agent, with
respect to such matters, with full power of substitution and resubstitution.
4.4 Registration Rights. Effective as of the Closing, the
Company and each Fund shall each have the rights and obligations set forth in
Exhibit B.
4.5 Transfer Taxes. The Funds shall be responsible for the
payment of any stock transfer taxes in connection with the Share Purchase and
the conversion of any shares of Class B Stock or Class A Stock owned by the
Funds into shares of Common Stock.
4.6 Listing of Shares of Common Stock. The Company will use
its reasonable best efforts to cause the shares of Common Stock issued in the
Recapitalization to be listed for trading on the New York Stock Exchange,
subject to official notice of issuance, prior to the Closing.
-7-
4.7 Financing. The Company will use its reasonable best
efforts to secure the Financing. In the event that any portion of the Financing
necessary to consummate the Share Purchase becomes unavailable, regardless of
the reason therefor, the Company will use its reasonable best efforts to obtain
alternative financing from other sources on and subject to substantially the
same terms and conditions as the portion of such Financing that has become
unavailable. The Company shall use its reasonable best efforts to satisfy on or
before the Closing all requirements of the definitive agreements pursuant to
which the Financing will be obtained (the "Financing Agreements"), which are
conditions to closing the portion of the Financing necessary to consummate the
Share Purchase and to drawing down the cash proceeds thereunder necessary to
consummate the Share Purchase and the conditions to the Closing of the Share
Purchase and the other transactions contemplated by this Agreement.
Notwithstanding the foregoing, the Company shall not be required to pay costs
and expenses in connection with arranging the Financing (or any alternative
financing) materially in excess of the costs and expenses contemplated by the
Commitment Letter or agree to financing terms that differ in a manner materially
adverse to the Company from those contemplated by the Commitment Letter.
4.8 Funds Designee. Effective as of the Closing, and until the
earlier of (a) the Company's 2004 annual meeting of stockholders and (b) such
time as the Funds jointly own less than 10% of the issued and outstanding shares
of Common Stock, the Company will use its reasonable best efforts to cause one
designee of the Funds to be nominated and elected as a member of the Company's
Board of Directors.
4.9 Section 16 Matters. Prior to the Closing, the Company
shall take all such steps as may be required to cause the transactions
contemplated by this Agreement, including any dispositions of the shares of
Class A Stock and Class B Stock and acquisitions of Common Stock by each
individual that is or will be subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to the Company to be exempt under Rule
16b-3 promulgated under the Exchange Act.
4.10 The Merger Agreement. Subject to Section 1.1(c), the
Company shall, prior to the mailing of the Proxy Statement, form Merger Sub and
enter into, and cause Merger Sub to enter into, the Merger Agreement.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation. The respective
obligation of each party to effect the Share Purchase and the Recapitalization
shall be subject to the satisfaction prior to the Closing of the following
conditions:
(a) Requisite Stockholder Approval. The Requisite Stockholder
Approval shall have been obtained.
(b) Registration Statement. The Registration Statement shall
have been declared effective and shall be effective at the Effective Time, and
no stop order suspending effectiveness shall have been issued, no action, suit,
proceeding or investigation by the Commission to suspend the effectiveness
thereof shall have been initiated and be continuing, and
-8-
all necessary approvals under state securities laws or the Securities Act or the
Exchange Act related to the issuance or trading of the Common Stock shall have
been received.
(c) No Injunctions or Restraints. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other governmental entity or other legal restraint or
prohibition preventing the consummation of the Share Purchase, the filing of the
Certificate of Merger or, if applicable, the Certificate of Amendment with the
Secretary of State of the State of Delaware or the Merger or, if applicable, the
Charter Amendment shall be in effect; provided, however, that each of the
parties shall have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.
(d) Listing of Shares of Common Stock. The shares of Common
Stock to be issued in the Recapitalization shall have been approved for listing
on the New York Stock Exchange, subject only to official notice of issuance.
5.2 Conditions to the Company's Obligation. The obligation of
the Company to effect the Share Purchase and the Recapitalization shall be
subject to the satisfaction at or prior to the Closing Date of the following
additional conditions:
(a) Performance of Obligations; Representations and
Warranties. (1) Each of the Funds shall have performed in all material respects
each of its agreements contained in this Agreement required to be performed at
or prior to the Closing Date and (2) each of the representations and warranties
of each of the Funds contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as if made on and as of such
date (other than to the extent that any such representation and warranty, by its
terms, is expressly limited to a specific date, in which case such
representation and warranty shall be true and correct in all material respects
as of such date).
(b) Financing. The Company shall have obtained the Financing
on terms consistent with the terms contemplated by the Commitment Letter or
otherwise reasonably acceptable to the Company.
5.3 Conditions to the Funds' Obligation. The obligation of the
Funds to effect the Share Purchase and the Recapitalization shall be subject to
the satisfaction at or prior to the Closing Date of the following additional
conditions: (a) The Company shall have performed in all material respects each
of its agreements contained in this Agreement required to be performed at or
prior to the Closing Date and (b) each of the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of such
date (other than to the extent that any such representation and warranty, by its
terms, is expressly limited to a specific date, in which case such
representation and warranty shall be true and correct in all material respects
as of such date).
-9-
ARTICLE VI
TERMINATION
6.1 Bases for Termination. Anything contained herein to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of the Company (which consent
shall have been given by the directors of the Company who are unaffiliated with
the Funds) and each of the Funds;
(b) by the Company if any of the conditions set forth in
Section 5.2 shall have become incapable of fulfillment, and shall not have been
waived by the Company;
(c) by the Funds if any of the conditions set forth in Section
5.3 shall have become incapable of fulfillment, and shall not have been waived
by the Funds; and
(d) by the Company or the Funds if the Closing does not occur
on or prior to September 30, 2002;
provided, however, that the party seeking termination pursuant to clause (b),
(c), or (d) is not in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement.
6.2 Notice of Termination. In the event of termination by the
Company or the Funds pursuant to this Article VI, written notice thereof shall
forthwith be given to the other party or parties and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party.
6.3 Effect of Termination. If this Agreement is terminated and
the transactions contemplated hereby are abandoned as described in this Article
VI, this Agreement shall become void and of no further force and effect. Nothing
in this Article VI shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to
impair the right of any party to compel specific performance by another party of
its obligations under this Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Counterparts. This Agreement may be executed in any number
of counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
7.2 Entire Agreement. This Agreement (including the exhibits
attached hereto) constitutes the entire agreement among the parties and
supersedes all prior agreements, understandings, arrangements or representations
by or among the parties, written and oral, with respect to the subject matter
hereof.
-10-
7.3 Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries.
7.4 Governing Law; Jurisdiction. This Agreement shall be
governed by the laws of the State of Delaware, without giving effect to the
conflict of laws principles thereof. Each party irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
Delaware and of the United States of America, in each case located in the State
of Delaware, for any action or proceeding arising out of or relating to this
Agreement and the transactions contemplated by this Agreement (and agrees not to
commence any action except in any such court). Each party irrevocably and
unconditionally waives any objection to the laying of venue of any action or
proceeding in the courts of the State of Delaware or of the United States of
America, in each case located in the State of Delaware, and further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any action or proceeding brought in any such court has been brought in an
inconvenient forum. Each party irrevocably and unconditionally waives any right
it may have to a trial by jury in connection with any action or proceeding
arising out of or relating to this Agreement and the transactions contemplated
by this Agreement.
7.5 Specific Performance. The transactions contemplated by
this Agreement are unique. Accordingly, each of the parties acknowledges and
agrees that, in addition to all other remedies to which it may be entitled, each
of the parties hereto is entitled to a decree of specific performance and
injunctive and other equitable relief.
7.6 Amendment. This Agreement may not be altered, amended or
supplemented except by an agreement in writing signed by each of the parties
hereto and, in the case of the Company, approved by the directors of the Company
who are unaffiliated with the Funds.
7.7 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by facsimile, by courier service or by registered or certified mail
(postage prepaid, return receipt, requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 7.7):
If to the Funds, to:
Xxxx Xxxxxxx-Reader's Digest Fund, Inc.
XxXxxx Xxxxxxx-Reader's Digest Fund, Inc.
Xxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: M. Xxxxxxxxx XxXxxx
Facsimile No.: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
-00-
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
if to the Company, to:
The Reader's Digest Association, Inc.
Reader's Xxxxxx Xxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
7.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
(whether by operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
7.9 Fees and Expenses. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated by this Agreement shall be the responsibility of
and shall be paid by the party incurring such fees or expenses, whether or not
the transactions contemplated by this Agreement are consummated.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-12-
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be executed by its officer thereunto duly authorized as of the date
first written above.
XXXXXX XXXXXXX-READER'S
DIGEST FUND, INC.
By: /s/ M. Xxxxx XxXxxx
----------------------------------------
Name: M. Xxxxx XxXxxx
Title: President
XXXX XXXXXXX-READER'S
DIGEST FUND, INC.
By: /s/ M. Xxxxx XxXxxx
----------------------------------------
Name: M. Xxxxx XxXxxx
Title: President
THE READER'S DIGEST ASSOCIATION, INC.
By: /s/ Xxxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President
and General Counsel
[SIGNATURE PAGE TO RECAPITALIZATION AGREEMENT]
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of ______ __, 2002, is by and between The Reader's Digest Association, Inc., a
Delaware corporation (the "Company"), and [Merger Sub], a Delaware corporation
and a wholly owned subsidiary of the Company ("Merger Sub").
RECITALS
WHEREAS, pursuant to the Recapitalization Agreement (the
"Recapitalization Agreement"), dated as of April 12, 2002, by and among the
Company, the XxXxxx Xxxxxxx-Reader's Digest Fund, Inc. and the Xxxx
Xxxxxxx-Reader's Digest Fund, Inc. (together, the "Funds") and this Agreement,
the parties hereto desire to merge Merger Sub with and into the Company with the
Company surviving (the "Merger");
WHEREAS, pursuant to the Merger, among other things, each
share of Class B Voting Common Stock, par value $.01 per share, of the Company
("Class B Stock") outstanding immediately prior to the Merger will be converted
into 1.24 shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") and each share of Class A Nonvoting Common Stock, par value
$.01 per share, of the Company ("Class A Stock") outstanding immediately prior
to the Merger will be converted into one share of Common Stock;
WHEREAS, the respective Boards of Directors of the Company and
Merger Sub have determined that the Merger, in the manner contemplated herein,
is advisable and in the best interests of their respective corporations and
stockholders, and, by resolutions duly adopted, have approved and adopted this
Agreement and the Merger;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises contained herein, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms of this Agreement, at the
Effective Time (as defined below), Merger Sub shall be merged with and into the
Company in accordance with this Agreement, and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"). The Merger shall have the effects specified in the General
Corporation Law of the State of Delaware (the "DGCL").
1.2 Effective Time. Immediately following the consummation of
the Share Purchase (as defined in the Recapitalization Agreement), if this
Agreement shall not have been terminated as provided herein, Merger Sub and the
Company shall cause a certificate of merger (the "Certificate of Merger") in
accordance with the requirements of the DGCL to be properly executed and filed
in accordance therewith. The Merger shall become effective at the time of
A-1
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL (the "Effective Time").
ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Company's Restated
Certificate of Incorporation, as amended, as in effect immediately prior to the
Effective Time, shall be amended at the Effective Time as set forth in Annex A
hereto, and, as so amended, shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended in accordance with the
provisions thereof and applicable law.
2.2 Bylaws. The Amended and Restated By-Laws of the Company in
effect immediately prior to the Effective Time shall be the by-laws of the
Surviving Corporation, until thereafter changed or amended in accordance with
the provisions thereof and applicable law.
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 Directors of Surviving Corporation. The directors of the
Company immediately prior to the Effective Time shall be the directors of the
Surviving Corporation as of the Effective Time, until the earlier of their
death, resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
3.2 Officers of Surviving Corporation. The officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation as of the Effective Time, until the earlier of their
death, resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
ARTICLE IV
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
4.1 Effect of Merger on Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof:
(a) Each share of Class B Stock either issued and outstanding
or held by the Company as treasury stock immediately prior to the Effective Time
shall automatically be converted into 1.24 fully-paid and nonassessable shares
of Common Stock; provided that no fractional shares shall be issued to any
holder, and that instead of issuing such fractional shares, the Company shall
arrange for the disposition of fractional interests by those entitled thereto,
by the mechanism of having (1) the transfer agent or other agent of the Company
aggregate such fractional interests, (2) the shares resulting from the
aggregation sold and (3) the net proceeds
A-2
received from the sale allocated and distributed among the holders of the
fractional interests as their respective interests appear.
(b) Each share of Class A Stock either issued and outstanding
or held by the Company as treasury stock immediately prior to the Effective Time
shall automatically be converted into one fully-paid and nonassessable share of
Common Stock.
(c) Each share of preferred stock of the Company either issued
and outstanding or held by the Company as treasury stock immediately prior to
the Effective Time shall remain issued and outstanding or held as treasury
stock, as the case may be, and shall be unaffected by the Merger.
(d) Each share of common stock, par value $.01 per share, of
Merger Sub shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered or deliverable in exchange therefor.
4.2 Certificates Representing Class A Stock and Class B Stock.
From and after the Effective Time, each share certificate representing shares of
Class B Stock shall represent such number of shares of Common Stock obtained by
multiplying the number of shares of Class B Stock theretofore evidenced by such
certificate by 1.24, and each share certificate representing shares of Class A
Stock shall represent the same number of shares of Common Stock.
4.3 Dissenters' Rights. Notwithstanding the foregoing, to the
extent that holders of preferred stock are entitled to appraisal rights under
Section 262 of the DGCL, shares of preferred stock issued and outstanding
immediately prior to the Effective Time and held by a holder who has properly
exercised and perfected his demand for appraisal rights under Section 262 of the
DGCL (the "Dissenting Shares"), shall not be treated in accordance with Section
4.1(c) hereof, but rather the holders of Dissenting Shares shall be entitled to
receive from the Company such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if any such holder shall have
failed to perfect or shall effectively withdraw or lose his right to appraisal
and payment under the DGCL, each of such holder's shares of preferred stock
shall thereupon be treated in accordance with Section 4.1(c) hereof, and such
shares shall not be deemed to be Dissenting Shares.
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated at any time
after either (a) the termination of the Recapitalization Agreement or (b) the
alternative structure becomes applicable under Section 1.1(c) of the
Recapitalization Agreement and in each case prior to the Effective Time by
action of the Board of Directors of the Company.
5.2 Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of the Company or Merger Sub.
A-3
5.3 Waiver. At any time prior to the Effective Time, each
party may, to the extent legally allowed, waive compliance with any of the
agreements for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VI
GENERAL PROVISIONS
6.1 Counterparts. This Agreement may be executed in any number
of counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
6.2 Entire Agreement. This Agreement and the Recapitalization
Agreement (including the exhibits attached hereto and thereto) constitute the
entire agreement between the parties and supersede all prior agreements,
understandings, arrangements or representations by or between the parties,
written and oral, with respect to the subject matter hereof.
6.3 Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries.
6.4 Governing Law; Jurisdiction. This Agreement shall be
governed by the laws of the State of Delaware, without giving effect to the
conflict of laws principles thereof.
6.5 Amendment. This Agreement may not be altered, amended or
supplemented except by an agreement in writing signed by each of the parties
hereto and, in the case of the Company, approved by directors of the Company who
are unaffiliated with the Funds.
6.6 Assignment. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
A-4
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be executed by its officer thereunto duly authorized as of the date
first written above.
THE READER'S DIGEST ASSOCIATION, INC.
By:
----------------------------------
Name:
Title:
[MERGER SUB]
By:
----------------------------------
Name:
Title:
A-5
ANNEX A
[FORM OF AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION]
At the Effective Time, Article IV shall be amended and restated in its
entirety as set forth below:
ARTICLE IV
AUTHORIZED SHARES
The total number of shares which the Corporation
shall be authorized to issue is two hundred twenty-five
million three hundred ninety thousand (225,390,000) shares, of
which forty thousand (40,000) shares shall be Preferred Stock
of the par value of One Dollar ($1.00) per share, one hundred
twenty thousand (120,000) shares shall be Second Preferred
Stock of the par value of One Dollar ($1.00) per share, two
hundred thirty thousand (230,000) shares shall be Third
Subordinated Preferred Stock of the par value of One Dollar
($1.00) per share, twenty-five million (25,000,000) shares
shall be Preference Stock of the par value of One Cent ($.01)
per share, issuable in series and two hundred million
(200,000,000) shares shall be Common Stock of the par value of
One Cent ($.01) per share. The designations and the powers,
preferences and relative, participating, optional or other
special rights, and the qualifications, limitations and
restrictions of the shares of each such class of the capital
stock of the Corporation are as follows:
(a) The holders of shares of Preferred Stock
(sometimes called "First Preferred Stock") shall be entitled
to receive, when and as declared by the Board of Directors,
dividends thereon at the rate of Four Dollars ($4.00) per
share per annum and no more, payable in cash quarterly on the
first days of January, April, July and October in each year,
accruing from the date of issue of such shares. Such dividends
shall be cumulative, so that if dividends on all issued and
outstanding shares of Preferred Stock (First Preferred Stock)
at the rate of Four Dollars ($4.00) per share per annum shall
not have been paid or set apart for payment for the current
and all past quarterly dividend periods, the deficiency shall
be paid or set apart for payment before any distribution,
whether by way of dividends or otherwise, on the Second
Preferred Stock or the Third Subordinated Preferred Stock or
the Preference Stock or the Common Stock of the Corporation
shall be declared or paid upon or set apart for payment and
before any Second Preferred Stock or any Third Subordinated
Preferred Stock or any Preference Stock or any Common Stock of
the Corporation shall be purchased by or for the account of
the Corporation.
(b) After all dividends on the Preferred Stock (First
Preferred Stock) for all past quarterly dividend periods have
been paid or declared and a sum sufficient for the payment
thereof set apart, the holders of shares of Second Preferred
Stock shall be entitled to receive, when and as declared by
the Board of Directors, dividends thereon at the rate of Four
Dollars ($4.00) per share per annum and no more, payable in
AA-1
cash quarterly on the first days of January, April, July and
October in each year, accruing from the date of issue. Such
dividends shall be cumulative so that if dividends on all
issued and outstanding shares of Second Preferred Stock at the
rate of Four Dollars ($4.00) per share per annum shall not
have been paid or set apart for payment for the current and
all past quarterly dividend periods, the deficiency shall be
paid or set apart for payment before any distribution, whether
by way of dividends or otherwise, on the Third Subordinated
Preferred Stock or the Preference Stock or the Common Stock of
the Corporation shall be declared or paid upon or set apart
for payment, and before any Third Subordinated Preferred Stock
or any Preference Stock or any Common Stock of the Corporation
shall be purchased by or for the account of the Corporation.
(c) After all dividends on the Second Preferred Stock
for all past quarter dividend periods have been paid or
declared and a sum sufficient for the payment thereof set
apart, the holders of shares of Third Subordinated Preferred
Stock shall be entitled to receive, when and as declared by
the Board of Directors, dividends thereon at the rate of Five
Dollars ($5.00) per share per annum and no more, payable in
cash quarterly on the first days of January, April, July and
October in each year, accruing from the record date, in the
case of a stock dividend, and the date of issue in all other
cases. Such dividends shall be cumulative so that if dividends
on all issued and outstanding shares of Third Subordinated
Preferred Stock at the rate of Five Dollars ($5.00) per share
per annum shall not have been paid or set apart for payment
for the current and all past quarterly dividend periods, the
deficiency shall be paid or set apart for payment before any
distribution, whether by way of dividends or otherwise, on the
Preference Stock or the Common Stock shall be declared or paid
upon or set apart for payment, and before any Preference Stock
or any Common Stock of the Corporation shall be purchased by
or for the account of the Corporation.
(d) In the event of any liquidation, dissolution or
winding-up of the Corporation (whether voluntary or
involuntary) the holders of the Preferred Stock (First
Preferred Stock) shall be entitled to receive and be paid the
sum of One Hundred Dollars ($100.00) for each share of such
Preferred Stock together with an amount equal to all accrued
and unpaid dividends thereon before any sum shall be paid to
or any assets distributed among the holders of the Second
Preferred Stock or the Third Subordinated Preferred Stock or
the Preference Stock or the Common Stock and after the payment
to the holders of the Preferred Stock (First Preferred) of the
sums stated, the remaining assets and funds of the Corporation
shall be divided among and paid to the holders of the Second
Preferred Stock and the Third Subordinated Preferred Stock and
the Preference Stock and the Common Stock of the Corporation.
(e) In the event of any liquidation, dissolution or
winding-up of the Corporation (whether voluntary or
involuntary) the holders of the Second Preferred Stock shall
be entitled to receive and be paid the sum of One Hundred
Dollars ($100.00) for each share of such Second
AA-2
Preferred Stock, together with an amount equal to all accrued
and unpaid dividends thereon before any sum shall be paid to
or any assets distributed among the holders of the Third
Subordinated Preferred Stock or the Preference Stock or the
Common Stock of the Corporation; provided, however, that no
such payments shall be made unless the holders of any shares
of Preferred Stock (First Preferred Stock) which may be
outstanding at the time shall have received any sums to which
they may be entitled in such event. After payment to the
holders of the Preferred Stock (First Preferred Stock) of the
sums stated in subparagraph (d) hereof, and payment to the
holders of the Second Preferred Stock of the sums stated in
this subparagraph (e) the remaining assets and funds of the
Corporation shall be divided among and paid to the holders of
the Third Subordinated Preferred Stock and the Preference
Stock and the Common Stock of the Corporation.
(f) In the event of any liquidation, dissolution or
winding-up of the Corporation (whether voluntary or
involuntary) the holders of the Third Subordinated Preferred
Stock shall be entitled to receive and to be paid the sum of
One Hundred Dollars ($100.00) for each share of such Third
Subordinated Preferred Stock, together with an amount equal to
all accrued and unpaid dividends thereon before any sum shall
be paid to or any assets distributed among the holders of the
Preference Stock or the Common Stock of the Corporation;
provided, however, that no such payments shall be made unless
the holders of any shares of Preferred Stock (First Preferred
Stock) or Second Preferred Stock which may be outstanding at
the time shall have received any sums to which they may be
entitled in such event. After payment of the holders of the
Preferred Stock (First Preferred Stock) of the sums stated in
subparagraph (d) hereof, and payment to the holders of the
Second Preferred Stock of the sums stated in subparagraph (e)
and payment to the holders of the Third Subordinated Preferred
Stock of the sums stated in subparagraph (f), the remaining
assets and funds of the Corporation shall be divided among and
paid to the holders of the Preference Stock and the Common
Stock of the Corporation.
(g) The Corporation, at the option of the Board of
Directors, may redeem the whole or any part of the issued and
outstanding Preferred Stock (First Preferred Stock) at any
time, or from time to time, at the redemption price of One
Hundred and Five Dollars ($105.00) per share together with an
amount equal to all unpaid accrued dividends thereon computed
to the date of redemption. In the event that less than all the
issued and outstanding shares of Preferred Stock are to be
redeemed, the amount to be redeemed and the method of
effecting such redemption, whether by lot or pro rata, may be
determined by the Board of Directors. Notice of such
redemption, stating the date upon which, and the place at
which certificates representing the shares to be redeemed
shall be surrendered, shall be mailed not less than fifteen
(15) days prior to the redemption date to each holder of such
shares at his address as it appears on the books of the
Corporation. From and after the redemption date, unless
default shall be made by the Corporation in providing the
funds for redemption, all rights of the holders in respect of
such shares
AA-3
shall cease except the right to receive the redemption price
payable upon surrender of certificates representing such
shares, together with any amount equal to all unpaid accrued
dividends thereon.
(h) The Corporation, at the option of the Board of
Directors, may redeem the whole or any part of the issued and
outstanding Second Preferred Stock at any time, or from time
to time, at the redemption price of One Hundred and Five
Dollars ($105.00) per share together with an amount equal to
all unpaid accrued dividends thereon computed to the date of
redemption; provided, however, that so long as any shares of
the Preferred Stock (First Preferred Stock) are outstanding
the Board of Directors may not redeem any shares of the Second
Preferred Stock unless all dividends on the Preferred Stock
(First Preferred Stock) for all past quarterly dividend
periods shall have been paid or declared and a sum sufficient
for the payment thereof set apart. In the event that less than
all the issued and outstanding shares of Second Preferred
Stock are to be redeemed, the amount to be redeemed and the
method of effecting such redemption, whether by lot or pro
rata, may be determined by the Board of Directors. Notice of
such redemption, stating the date upon which, and the place at
which certificates representing the shares to be redeemed
shall be surrendered, shall be mailed not less than fifteen
(15) days prior to the redemption date to each holder of such
shares at his address as it appears on the books of the
Corporation. From and after the redemption date, unless
default shall be made by the Corporation in providing the
funds for redemption, all rights of the holders in respect of
such shares shall cease except the right to receive the
redemption price payable upon surrender of certificates
representing such shares, together with an amount equal to all
unpaid accrued dividends thereon.
(i) The Corporation, at the option of the Board of
Directors, may redeem the whole or any part of the issued or
outstanding Third Subordinated Preferred Stock at any time, or
from time to time, at the redemption price of One Hundred and
Five Dollars ($105.00) per share together with an amount equal
to all unpaid accrued dividends thereon computed to the date
of redemption; provided, however, that so long as any shares
of the Preferred Stock (First Preferred Stock) and the Second
Preferred Stock are outstanding the Board of Directors may not
redeem any shares of the Third Subordinated Preferred Stock
unless all dividends on the Preferred Stock (First Preferred
Stock) and Second Preferred Stock for all past quarterly
dividend periods shall have been paid or declared and a sum
sufficient for the payment thereof set apart. In the event
that less than all the issued and outstanding shares of Third
Subordinated Preferred Stock are to be redeemed, the amount to
be redeemed and the method of effecting such redemption,
whether by lot or pro rata, may be determined by the Board of
Directors. Notice of such redemption, stating the date upon
which, and the place at which certificates representing the
shares to be redeemed shall be surrendered, shall be mailed
not less than fifteen (15) days prior to the redemption date
to each holder of such shares at his address as it appears on
the books of the Corporation. From and after the redemption
date, unless default shall be made by the Corporation in
providing the funds for
AA-4
redemption, all rights of the holders in respect of such
shares shall cease except the right to receive the redemption
price payable upon surrender of certificates representing such
shares, together with an amount of all unpaid accrued
dividends thereon.
(j) Except as expressly otherwise provided by law,
the holders of the Preferred Stock (First Preferred Stock) and
the holders of the Second Preferred Stock and the holders of
the Third Subordinated Preferred Stock shall not be entitled
to vote at any meeting of the stockholders or to receive
notice of such meeting.
(k) (A) The Preference Stock may be issued, from time
to time, by the Board of Directors as shares of one or more
series of Preference Stock. The Board of Directors is
expressly authorized to fix, by resolution or resolutions, the
powers, designations, preferences and relative, participating,
optional or other special rights, if any, or the
qualifications, limitations or restrictions thereof,
pertaining to each series of Preference Stock, including,
without limitation:
(i) the distinctive serial designation of such series
which shall distinguish it from other series;
(ii) the number of shares included in such series,
which number may be increased or decreased from time to time
unless otherwise provided by the Board of Directors in
creating the series;
(iii) the annual dividend rate or rates (or method of
determining such rate or rates, including the date or dates,
if any, upon which and the terms and conditions under which,
such dividend rate or rates may be reset or otherwise
modified) for shares of such series and the date or dates upon
which such dividends shall be payable;
(iv) whether dividends on the shares of such series
shall be cumulative, and, in the case of shares of any series
having cumulative dividend rights, the date or dates or method
of determining the date or dates from which dividends of the
shares of such series shall be cumulative;
(v) the amount or amounts which shall be paid out of
the assets of the Corporation to the holders of the shares of
such series upon voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation;
(vi) the price or prices at which, the period or
periods within which and the terms and conditions upon which
the shares of such series may be redeemed, in whole or in
part, at the option of the Corporation;
(vii) the obligation, if any, of the Corporation to
purchase or redeem, in whole or in part, shares of such series
pursuant to a sinking fund or redemption or purchase account,
at the option of the holders of such shares, upon the
happening of a specified event or otherwise and the
AA-5
price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such
series shall be purchased or redeemed, in whole or in part,
pursuant to such obligation;
(viii) whether the shares of such series shall be
convertible into, or exchangeable for, at the option of either
the holder or the Corporation or upon the happening of a
specified event or otherwise, shares of any other class or
classes or any other series of the same or any other class or
classes of capital stock of the Corporation, or any other
securities of the Corporation or any shares of stock or
securities of any other corporation or other entity, and the
terms and conditions of any such conversion or exchange,
including (without limitation) the price or prices or the rate
or rates of conversion or exchange and the terms and
conditions of any adjustments thereof, and the period or
periods within which such conversion or exchange may occur;
(ix) the voting rights, if any, of the shares of such
series in addition to those required by law, including the
number of votes per share and any requirement for the approval
by the holders of all Preference Stock, or of the shares of
one or more series, or of both, in an amount greater than a
majority, up to such amount as is in accordance with
applicable law, as a condition to specified corporate action
or amendments to the certificate of incorporation;
(x) the ranking of the shares of the series as
compared with shares of other series of the Preference Stock
in respect of the right to receive dividends and the right to
receive payments out of the assets of the Corporation upon
voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation;
(xi) whether there shall be any limitations
applicable, while shares of such series are outstanding, upon
the payment of dividends or the making of distributions on, or
the acquisition of, or the use of moneys for purchase or
redemption of, any capital stock of the Corporation, or upon
any other action of the Corporation, and if so, the terms and
conditions thereof; and
(xii) any other powers, preferences and relative,
participating, optional or other rights and any
qualifications, limitations or restrictions not inconsistent
herewith or with applicable law.
All shares of any one series of Preference Stock
shall be alike in every particular except as to the dates from
and after which dividends thereon shall be cumulative.
(B) Notwithstanding the provisions of the foregoing
paragraph (k)(A) of this Article IV, the authority of the
Board of Directors to fix the powers, designations,
preferences, rights, qualifications, limitations and
restrictions pertaining to the shares of Preference Stock or
any series thereof shall be subject to the limitation that all
shares of Preference Stock shall be subject to the rights and
AA-6
preferences of the Preferred Stock (First Preferred Stock),
Second Preferred Stock and Third Subordinated Preferred Stock.
(C) All shares of Preference Stock shall rank senior
to the Common Stock in respect of the right to receive
dividends and the right to receive payments out of the assets
of the Corporation upon the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation,
except as set forth in the resolution or resolutions of the
Board of Directors creating and designating any series of
Preference Stock. All shares of Preference Stock redeemed,
purchased or otherwise acquired by the Corporation (including
shares surrendered for conversion or exchange) shall be
cancelled and thereupon restored to the status of authorized
but unissued shares of Preference Stock undesignated as to
series, unless otherwise provided in the resolution or
resolutions of the Board of Directors creating and designating
the series of Preference Stock of which the shares that are
redeemed, purchased or otherwise acquired by the Corporation
are a part.
(l) Subject to the rights and preferences of the
First Preferred Stock, Second Preferred Stock, Third
Subordinated Preferred Stock and Preference Stock, as set
forth in paragraphs (a) through (k) of this Article IV, the
Common Stock shall participate share and share alike in all
dividends and distributions of assets upon liquidation or
otherwise and the holders of the Common Stock of the
Corporation shall have full voting power for all purposes,
with each share of Common Stock entitled to one vote per
share, save as otherwise required by law.
(m) None of the holders of capital stock of any class
shall be entitled as of right to purchase or subscribe for any
unissued stock of the Corporation of any class or any
additional shares of any class to be issued by reason of any
increase of the authorized stock of the Corporation, or any
other securities convertible into or exchangeable for stock of
the Corporation or carrying any right to purchase such stock.
At the Effective Time, Article V shall be amended and restated
in its entirety as set forth below:
(a) The business and affairs of the Corporation shall
be managed by or under the direction of the Board of
Directors. The number of Directors of the Corporation shall be
fixed by the Board of Directors in the manner provided in the
By-Laws, but in no case shall the number be less than three
(3) nor more than twelve (12). The Directors need not be
stockholders. The election of the Directors of the Corporation
need not be by written ballot unless the By-Laws so require.
The Directors of the Corporation, other than those who may be
elected by the holders of any series of Preferred Stock or
Preference Stock under specific circumstances, shall be
divided into three classes as nearly equal in number as is
reasonably possible. Xxxxxxxx X. Xxxxxxxx, Xxxxxx Xxxx, X.X.
Xxxxx and Xx Xxxxxx shall be members of the first class of
directors with terms expiring at the 2002 annual meeting of
stockholders. Xxxxx X. Xxxxxxx, Xxxxxxxx X. Xxxxxxxxx and
Xxxxxxx X. Xxxxx shall be
AA-7
members of the second class of directors with terms expiring
at the 2003 annual meeting of stockholders. Xxxxx X. Xxxxxx,
M. Xxxxxxxxx XxXxxx and Xxxxxx X. Xxxxx shall be members of
the third class of directors with terms expiring at the 2004
annual meeting of stockholders. At each subsequent annual
meeting of stockholders, the successors to the directors whose
terms shall expire that year shall be elected to hold office
for the term of three years, so that the term of office of one
class of directors shall expire in each year. In any event,
each director of the Corporation shall hold office until that
director's successor is duly elected and qualified.
(b) In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware, the
Board of Directors is expressly authorized and empowered:
(1) To adopt, amend or repeal the By-Laws of
the Corporation; provided, that such action shall require the
affirmative vote of a majority of the total number of
Directors. Nothing herein shall limit the power of the holders
of shares of Common Stock of the Corporation to adopt, amend
or repeal the By-Laws of the Corporation.
(2) To provide for the issuance, from time
to time, of the shares of stock of the Corporation, whether
now or hereafter authorized, for such consideration and on
such terms and conditions as it may lawfully fix from time to
time; and all shares so issued, the full consideration for
which has been paid, shall be deemed fully paid and
nonassessable.
(c) A Director of the Corporation shall not be liable
to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a Director, except to the
extent that such exemption from liability or limitation
thereof is not permitted under Title 8, Chapter 1 of the
Delaware Code as currently in effect or as the same may
hereafter be amended. No amendment, modification or repeal of
this paragraph shall adversely affect any right or protection
of a Director that exists at the time of such amendment,
modification or repeal.
At the Effective Time, the following new article shall be
added immediately after Article VIII:
ARTICLE IX
ACTION BY WRITTEN CONSENT
No action required to be taken or which may be taken
at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting and the power of
stockholders to consent in writing is specifically denied.
AA-8
EXHIBIT B
REGISTRATION RIGHTS
(a) From and after the Closing, and following September 3,
2002, and until the earliest of (1) the second anniversary of the date of the
Agreement, (2) such time as the Funds do not own collectively more than
2,250,000 shares of Common Stock and (3) such time as the Funds are able to sell
all of their remaining shares of Common Stock under Rule 144 promulgated under
the Securities Act within a three month period (the earliest of such dates, the
"Termination Date"), the Funds shall have the right to make two requests (the
"Requests") of the Company in writing for registration under the Securities Act
of shares of Common Stock owned by the Funds (it being understood that a request
hereunder by either one or both of the Funds shall count as a Request); provided
that the Funds shall not have the right to exercise their second Request prior
to 180 days following completion of an offering pursuant to the first Request.
In order to best facilitate an orderly process, each of the Funds will use its
reasonable best efforts to informally advise the Company as promptly as possible
in advance of submitting a Request that it is contemplating submitting a
Request. In the event the Company determines that it desires to conduct an
underwritten public offering for the account of the Company of Common Stock
(other than a registration relating to the sale of securities to participants in
a dividend reinvestment plan, a registration on Form S-4 relating to a business
combination or similar transaction, a registration on Form S-8 or a registration
permitted under Rule 462 of the Securities Act) after September 3, 2002 and
prior to October 31, 2002, the Company will notify the Funds in writing and if
within 5 business days of receipt of such notice the Funds submit a Request to
the Company, the Company shall refrain from conducting any public offering of
Common Stock prior to November 1, 2002.
(1) The Company shall use its reasonable best efforts to cause
the shares of Common Stock to be registered under the Securities Act as soon as
reasonably practicable after receipt of such Requests so as to permit promptly
the sale thereof in accordance with paragraph (b) hereof.
(2) Each Fund hereby undertakes to provide all such
information and materials and take all such action as may be required in order
to permit the Company to comply with all applicable requirements of the
Commission and to obtain any desired acceleration of the effective date of such
registration statement.
(3) Any registration statement filed at the Funds' request
hereunder will not count as a Request unless effectiveness is maintained until
the earlier of the completion of the offering and the date that is three months
following the effective date of such registration statement.
(4) Notwithstanding the foregoing, the Company shall be
entitled to postpone for a reasonable period of time (not to exceed 60 days in
the case of any given postponement, and not to exceed 120 days in any twelve
month period in the case of more than one postponement) the filing of any
registration statement otherwise required to be prepared and filed by the
Company if (A) the Company is, at such time, conducting, or proposing to file
with the Commission within 30 days a registration statement with respect to an
underwritten public
B-1
offering for the account of the Company of equity securities (or securities
convertible into equity securities) and is advised in writing by its managing
underwriter or underwriters (with a copy to the Funds) that such offering would,
in its or their opinion, be materially and adversely affected by the
registration so requested (provided that the Company may not exercise its right
to so postpone pursuant to this clause (A) in September or October 2002), or (B)
the Company determines, in good faith, that effecting the registration at such
time would reasonably be expected to (i) adversely affect a pending or
contemplated acquisition, disposition of assets or stock, merger or other
significant transaction or (ii) require the Company to make public disclosure of
information the public disclosure of which, at such time, is not then otherwise
required by law and which at such time the Company in good faith believes would
be adverse in a material respect to the Company's interest to disclose.
(5) No securities may be registered on a registration
statement requested by the Funds pursuant to this paragraph (a) without the
Funds' express written consent, unless the amount of such securities is subject
to reduction prior to any reduction in the number of shares of Common Stock
originally requested by the Funds to be registered in the event that the
managing underwriters of the related offering advise the Funds in writing (with
a copy to the Company) that they believe that the success of such offering would
be materially and adversely affected by inclusion of all of the securities
requested to be included therein. If the managing underwriters so advise that
they believe that the success of such offering would be materially and adversely
affected by inclusion of all the shares of Common Stock requested to be
registered by the Funds, then the number of shares of Common Stock to be
included in such registration by each Fund shall be reduced pro rata, on the
basis of the number of shares of Common Stock each Fund requested to be included
in such registration.
(b) If the Company is required by the provisions of paragraph
(a) to use its reasonable best efforts to effect the registration of shares of
Common Stock under the Securities Act, the Company will:
(1) as expeditiously as possible, but in any event not later
than 30 days after receipt of a Request, prepare and file with the Commission a
registration statement, on such form as the Company in its reasonable discretion
shall determine, with respect to such shares of Common Stock and use its
reasonable best efforts to cause such registration statement promptly to become
and remain effective for a period of time required for the disposition of such
shares of Common Stock by the Fund or Funds registering shares (the "Selling
Stockholders") but not to exceed 90 days, provided, however, that before filing
such registration statement or any amendments thereto, the Company shall furnish
to the representatives of the Selling Stockholders copies of all documents
proposed to be filed and counsel to the Selling Stockholders shall have a
reasonable opportunity to comment thereon;
(2) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of the shares of Common Stock covered by such registration
statement until the earlier of such time as all of such shares have been
disposed of in a public offering or the expiration of 90 days from the date of
initial effectiveness;
B-2
(3) furnish to such Selling Stockholders such number of
conformed copies of the applicable registration statement and each such
amendment and supplement thereto (including in each case all exhibits), and of a
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Selling Stockholders may reasonably request;
(4) use its reasonable best efforts to register or qualify the
shares of Common Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as each Selling Stockholder shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and to take any other action which may be
reasonably necessary to enable such Selling Stockholder to consummate the
disposition in such jurisdictions of the shares of Common Stock owned by such
Selling Stockholder (provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business,
subject itself to taxation in or to file a general consent to service of process
in any jurisdiction wherein it would not but for the requirements of this
paragraph (4) be obligated to do so), and do such other reasonable acts and
things as may be required of it to enable such Selling Stockholder to consummate
the disposition in such jurisdiction of the shares of Common Stock covered by
such registration statement;
(5) use its reasonable best efforts to furnish, at the request
of any Selling Stockholder requesting registration of shares of Common Stock
pursuant to paragraph (a) if the method of distribution is by means of an
underwriting, on the date that the shares of Common Stock are delivered to the
underwriters for sale pursuant to such registration, or if such shares of Common
Stock are not being sold through underwriters, on the date that the registration
statement with respect to such shares of Common Stock becomes effective, (A) a
signed opinion, dated such date, of the legal counsel representing the Company
for the purpose of such registration (who may be inside counsel), addressed to
the underwriters, if any, and to the Selling Stockholders making such request,
as to such matters as such underwriters or the Selling Stockholders holding a
majority of the shares of Common Stock included in such registration, as the
case may be, may reasonably request and as would be customary in an underwritten
public offering, (B) letters dated such date and the date the offering is priced
from the independent certified public accountants of the Company, addressed to
the underwriters, if any, and (if permissible under the policies of such
independent certified public accountants) to the Selling Stockholders making
such request (i) stating that they are independent certified public accountants
within the meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements and other financial data of the Company
included in the registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and (ii) covering such
other financial matters (including information as to the period ending not more
than five (5) business days prior to the date of such letters) with respect to
the registration in respect of which such letter is being given as such
underwriters or the Selling Stockholders holding a majority of the shares of
Common Stock included in such registration, as the case may be, may reasonably
request and as would be customary in an underwritten public offering (it being
understood that the language and content of the accountants' letters with
respect to clauses (i) and (ii) of this paragraph shall be subject to the
policies applicable to "comfort letters" of such accountants) and (C) a
certificate of an officer of the Company certifying that the representations
B-3
and warranties contained in the underwriting agreement are true and correct in
all material respects;
(6) if the method of distribution is by means of an
underwriting, enter into customary agreements (including an underwriting
agreement in customary form) with two underwriters, one selected by the Selling
Stockholders and one selected by the Company, which underwriters shall be
co-book running managers, and take such other actions as are reasonably required
in order to expedite or facilitate the disposition of such shares of Common
Stock;
(7) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
generally available to the Selling Stockholders no later than 45 days after the
end of any twelve-month period (or 90 days, if such period is a fiscal year) (A)
commencing at the end of any fiscal quarter in which shares of Common Stock are
sold to underwriters in an underwritten public offering, or (B) if not sold to
underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
registration statement, which statements shall cover said twelve-month period;
(8) use its reasonable best efforts to cause all such shares
of Common Stock to be listed on each securities exchange or quotation system on
which similar securities issued by the Company are listed or traded;
(9) give written notice to the Selling Stockholders;
(A) when such registration statement or any amendment
thereto has been filed with the Commission and when
such registration statement or any post-effective
amendment thereto has become effective;
(B) of any request by the Commission for amendments or
supplements to such registration statement or the
prospectus included therein or for additional
information;
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration
statement or the initiation of any proceeding for
that purpose;
(D) of the receipt by the Company or its legal counsel of
any notification with respect to the suspension of
the qualification of the Common Stock for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(E) of the happening of any event that requires the
Company to make changes in such registration
statement or the prospectus in order to make the
statements therein not misleading (which notice shall
be accompanied by an instruction to suspend the use
of the prospectus until the requisite changes have
been made);
B-4
(10) use its reasonable best efforts to prevent the issuance
or obtain the withdrawal of any order suspending the effectiveness of such
registration statement at the earliest possible time;
(11) make reasonably available for inspection by the
representatives of the underwriters participating in any disposition pursuant to
such registration statement relevant financial and other records, pertinent
corporate documents and properties of the Company in connection with customary
due diligence relating to such registration;
(12) in connection with any underwritten offering, to the
extent reasonably required and at such times as are not inconsistent with the
other obligations of senior executives of the Company, make such senior
executives available to the Selling Stockholders for meetings with prospective
purchasers of the shares of Common Stock and prepare and present to potential
investors customary "road show" material, in each case in accordance with the
reasonable recommendations of the underwriters and in all respects in a manner
consistent with other new issuances of securities in an offering of a similar
size to such offering of the shares of Common Stock, in connection with any
proposed sale of the shares of Common Stock in an aggregate offering of at least
$50 million; and
(13) use reasonable best efforts to procure the cooperation of
the Company's transfer agent in settling any offering or sale of Common Stock,
including with respect to the transfer of physical stock certificates into
book-entry form in accordance with any procedures reasonably requested by the
Selling Stockholders or the underwriters.
(c) From and after the date of this Agreement and until the
Termination Date, if the Company proposes to register for its own account any
shares of Common Stock or securities convertible into Common Stock under the
Securities Act (other than a registration relating to the sale of securities to
participants in a dividend reinvestment plan, a registration on Form S-4
relating to a business combination or similar transaction, a registration on
Form S-8 or a registration permitted under Rule 462 of the Securities Act), the
Company shall give each Fund written notice of such proposed registration. Upon
the written request of a Fund given within 10 days of receipt of such notice by
such Fund, the Company shall seek to include in such proposed registration such
shares of Common Stock owned by such Fund as such Fund shall request. The
Company shall be under no obligation to complete an offering of securities it
proposes to make under this paragraph and shall incur no liability to the Funds
for its failure to do so. If, at any time after giving notice of its intention
to register securities and prior to the effective date of the applicable
registration statement, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company shall give
notice to the Funds thereof and the Company shall be under no obligation to
register any shares of the Funds in connection with such registration. If a
registration pursuant to this paragraph involves an underwritten offering and
the managing underwriters of such offering believe that the success of the
offering would be materially and adversely affected by inclusion of all or part
of the shares of Common Stock which the Funds have requested to be included,
then the shares requested by the Funds for inclusion shall be subject to
reduction prior to any reduction in the securities to be registered by the
Company. If a public offering in which the Funds are offering shares of Common
Stock pursuant to this paragraph (c) includes more than $50 million of shares of
Common Stock of the Funds (after giving effect to any reduction pursuant to the
immediately preceding sentence), then
B-5
the Funds shall have the right to appoint a co-book running manager in
connection with such offering.
(d) In connection with a requested registration pursuant to
paragraph (a) or paragraph (c) of this Exhibit B, the Selling Stockholders shall
pay (on a pro rata basis, based upon the number of shares of Common Stock being
offered by each Selling Stockholder compared to the total number of shares being
offered) all underwriting discounts and commissions relating to the shares of
the Funds being so registered, filing fees, printing fees, fees and expenses of
complying with "blue sky" or state securities laws and reasonable fees and
expenses relating to "road show" investor presentations (including the costs of
any aircraft chartered in connection therewith). All fees and expenses of legal
counsel, accountants and other advisors incurred in connection with such a
registration statement shall be borne by the party incurring such fees and
expenses.
(e) In the case of each offering registered pursuant to this
Exhibit B, the Company agrees to indemnify and hold each Selling Stockholder,
each underwriter of Common Stock under such registration and each person who
controls any of the foregoing within the meaning of Section 15 of the Securities
Act, and the directors, officers and members of the Selling Stockholders,
harmless against any and all losses, claims, damages, liabilities or actions,
joint or several, to which they or any of them may become subject under the
Securities Act or any other statute or common law or otherwise, and to reimburse
them for any legal or other expenses reasonably incurred by them in connection
with investigating any claims and defending any actions, insofar as any such
losses, claims, damages, liabilities or actions shall arise out of or shall be
based upon (1) any untrue statement or alleged untrue statement of a material
fact contained in the registration statement relating to the sale of such Common
Stock, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading or (2) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus (as amended or supplemented if the Company shall have
filed with the Commission any amendment thereof or supplement thereto), if used
prior to the effective date of such registration statement, or contained in the
prospectus (as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the indemnification agreement contained
in this paragraph (e) shall not apply to such losses, claims, damages,
liabilities or actions which shall arise from the sale of shares of Common Stock
by the Selling Stockholders if such losses, claims, damages, liabilities or
actions shall arise out of or shall be based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, (i) made in
reliance upon and in conformity with information furnished in writing to the
Company by the Selling Stockholders or any such underwriter expressly for use in
connection with the preparation of the registration statement or any preliminary
prospectus or prospectus contained in the registration statement or any such
amendment thereof or supplement thereto or (ii) in the case of any underwriters
(and each person who controls any underwriters within the meaning of Section 15
of the Securities Act) and in the case of the Selling Stockholders in offerings
in which the Company has not appointed a co-managing book runner, made in any
preliminary prospectus, and the prospectus contained in the registration
statement in the form filed by the Company with
B-6
the Commission pursuant to Rule 424(b) under the Securities Act shall have
corrected such statement or omission and a copy of such prospectus shall not
have been sent or given to such person at or prior to the confirmation of such
sale to him.
(f) In the case of each offering registered pursuant to this
Exhibit B, the Selling Stockholders and each underwriter participating therein
agrees, in the same manner and to the same extent as set forth in paragraph (e)
of this Exhibit B, severally to indemnify and hold harmless (1) the Company and
each person, if any, who controls the Company (other than the Funds) within the
meaning of Section 15 of the Securities Act, and the directors and officers of
the Company, (2) in the case of each such underwriters, the Selling
Stockholders, each person, if any, who controls a Selling Stockholder within the
meaning of Section 15 of the Securities Act and the directors, officers and
members of the Selling Stockholders and (3) in the case of the Selling
Stockholders, the underwriters, each person, if any, who controls an underwriter
within the meaning of Section 15 of the Securities Act and the directors and
officers of the underwriters, with respect to any statement in or omission from
such registration statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) or prospectus contained
in such registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid), if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Company by the Selling Stockholders or such underwriter (as the case may be)
expressly for use in connection with the preparation of such registration
statement or any preliminary prospectus or prospectus contained in such
registration statement or any such amendment thereof or supplement thereto.
(g) Each party indemnified under paragraph (e) or (f) of this
Exhibit B shall, promptly after receipt of notice of the commencement of any
action against such indemnified party in respect of which indemnity may be
sought hereunder, notify the indemnifying party in writing of the commencement
thereof. The failure of any indemnified party to so notify an indemnifying party
of any such action shall not relieve the indemnifying party from any liability
in respect of such action which it may have to such indemnified party on account
of the indemnity agreement contained in paragraph (e) or (f) of this Exhibit B,
unless and only to the extent that the indemnifying party was prejudiced by such
failure, and in no event shall relieve the indemnifying party from any other
liability which it may have to such indemnified party. In case any such action
shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may desire, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under paragraph (e) or (f) of this
Exhibit B for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation; provided, however, that (1) if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the indemnified party, in its sole and absolute
discretion, for the same counsel to represent both the indemnified party and the
indemnifying party, or (2) the indemnifying party fails to assume the defense of
such action, then the indemnified party shall be entitled to retain its own
counsel (it being understood that the Selling Stockholders shall collectively be
entitled to only one counsel), in each jurisdiction for which the indemnified
party determines counsel is required, at the expense of the indemnifying party.
No such third party claim may be settled by
B-7
the indemnifying party or the indemnified party (unless such settlement includes
an unconditional release of the indemnified party from all liability arising out
of such claim or proceeding and does not include any relief other than the
payment of monetary damages) without the prior written consent of the other,
which consent shall not be unreasonably withheld.
(h) If the indemnification provided for under paragraph (e) or
(f) of this Exhibit B shall for any reason be held by a court to be unavailable
to an indemnified party under paragraph (e) or (f) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under paragraph (e) or (f) hereof, the
indemnified party and the indemnifying party under paragraph (e) or (f) hereof
shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating the same), (1) in such proportion as is appropriate to reflect the
relative fault of the Company and the prospective seller of securities covered
by the registration statement which resulted in such loss, claim, damage or
liability, or action in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations or (2)
if the allocation provided by clause (1) above is not permitted by applicable
law, in such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective seller from the offering of the
securities covered by such registration statement. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this paragraph
(h) were determined by pro rata allocation or by any other method of allocation
which does not take account the equitable considerations referred to in this
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. In addition,
no person shall be obligated to contribute hereunder any amounts in payment for
any settlement of any action or claim effected without such person's consent,
which consent shall not be unreasonably withheld.
(i) From and after the date of the Agreement, and until the
earlier of such time as (1) the Funds have no right to further Requests or (2)
the Funds together own less than 5% of the outstanding shares of Common Stock,
the Company shall not, without the prior written consent of the Funds, enter
into any agreement with any holder or prospective holder of any Common Stock or
securities convertible into Common Stock giving such holder or prospective
holder any registration rights the terms of which would restrict or interfere in
any material respect with the registration rights granted to the Funds
hereunder.
(j) There are no contractual obligations of the Company not to
engage in a public offering.
(k) Capitalized terms used and not defined in this Exhibit B
shall have the meanings set forth in the Agreement.
B-8
